 Cure or curse: Does downsizing increase the likelihood of bankruptcy?Michelle L. Zorn, Patricia M. Norman, Frank C. Butler and Manjot S. Bhussar Journal of Business Research, 2017, vol. 76, issue C, 24-33 Abstract: Downsizing is a common organizational practice, yet research on the outcomes of downsizing has produced mixed findings. To contribute to this debate, we use an organizational change perspective to investigate whether the large-scale changes inherent in downsizing set firms on a negative path that is difficult to overcome and ultimately increases the likelihood of bankruptcy. Additionally, we investigate what factors, if any, can mitigate this likelihood. To do so, we build on the resource-based view to suggest that valuable resources can reduce the likelihood that downsizing will lead to bankruptcy. We find support for our theorizing across a sample of publicly traded firms. Our findings suggest that downsizing firms are significantly more likely to declare bankruptcy than firms that do not engage in downsizing and that intangible resources help to mitigate this likelihood. We do not, however, find support for the role of physical and financial resources in preventing bankruptcy. Keywords: Downsizing; Bankruptcy; Organizational change; Resource-based view; Intangible resources (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:76:y:2017:i:c:p:24-33 DOI: 10.1016/j.jbusres.2017.03.006 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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